Sun Communities Inc (SUI) 2004 Q4 法說會逐字稿

Good morning ladies and gentlemen, and welcome to the Sun Communities Incorporated fourth quarter 2004 earnings results conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder this conference is being recorded.

At this time Management would like me to inform you that certain statements made during this conference call which are not historical facts may be deemed forward-looking statements within the meanings of the Private Securities Litigation Reform Act of 1995. Although the Company believes the expectations reflected in any forward looking statements are based on reasonable assumptions, the Company can provide no assurance that its expectations will be achieved. Factors and risks that could cause actual results to differ materially from expectations are detailed in this morning's press release, and from time to time in the Company's periodic filings with the S.E.C. The Company undertakes no obligation to advise or update any forward looking statements to reflect events or circumstances after the date of this release. Having said that, I would like to introduce Management with us today: Gary Shiffman, Chairman and Chief Executive Officer, and Jeff Jorissen, Chief Financial Officer. Mr. Shiffman, you may begin.

Thank you, and good morning. This morning we reported funds from operations of 10.3 million, for the fourth quarter and 53.9 million for the year ended December 31, 2004 compared to 12.1 million and 65.5 million for the comparable 2003 periods. On a diluted per share basis FFO of $0.50 for the fourth quarter and 2.57 for the year ended December 31st, '04. Compared to $0.57 cents and 3.14 for the prior year periods.

Total revenues increased to 52.4 million for the fourth quarter and 198.9 million for the year ended December 31st, 2004. Compared to 48.4 million, and 192.5 million, in the comparable '03 period. The foregoing numbers for 2004 exclude charges of 51.6 million for prepayment cost fees and related expenses, and 5.6 million of deferred financing costs all associated with the repurchase of $345 million of unsecured debt in the second quarter of 2004.

And I'd like to begin with some comments on 2004. A year ago we described 2004 as the year linking the bad news of the past, with the good news of the future. While the focus on that comment was intended to address an industry environment transitioning from decline to growth, it also addressed the Company's comprehensive refinancing. While the first half of 2004 reflected strongly improving occupancy statistics the second half suffered from a surge of repossessed homes depressing occupancy. New home shipments appear to have stabilized in both 2004 and 2003, at approximately 130,800 homes. I think it's important to note, that occupancy declines do not indicate an absence of demand for homes in our communities, but rather that the demand is being surpassed by the loss of occupancy, due again primarily to the remaining repossessions.

For each of the last two years new repossessions have totaled about 1350. Were these at normal levels of 400 to 600 occupancy for the last two years would have been about stable without considering the positive effect on new home sales which would be expected with reduced repos. Perhaps the interaction of these factors is best exhibited by the fact that for the first 50 days of 2005 we are filling 7.8 sites per day while losing 6.6 sites per day.

Another factor that we look at is the concentrated nature of the occupancy losses. In both 2003 and 2004, 75 percent of the net loss sites occurred in 15 of our communities of which 8 of these communities appear in both years. The other 120 or so communities averaged a loss of approximately 1-2 sites in each of the last two years. And as we discuss 2005 in a moment, you will hear how we are focused in making progress in these areas.

For 108 communities owned throughout both years total revenues increased 4 percent for the year and expenses increased 3.4 percent, representing a 4.25 percent NOI growth. For the fourth quarter revenue grew 5.7 percent, expenses were 2.5 percent resulting in an NOI growth of 7 percent while occupancy declined 1 percent. A significant decline in our share of Origins results severely impacted the quarter and I would refer you all to their press release of yesterday for those specifics.

Now, let's turn to 2005. As new repossessions are the primary driver of occupancy; losses accounting for over 50 percent of lost sites year-to-date, we're looking for evidence which exists regarding repo levels in 2005. The existing level of repo units in the inventory of finance companies is estimated to be about 20,199 at the end of 2004, which is down 22.7 percent from the prior year. Delinquencies, excluding repos, have shown a slight increase but a large servicer report January's performance to have been excellent, and Origins' third quarter earnings release also indicated improved delinquencies. Loss severities for the industry have also improved suggesting improved pricing of repossessed homes which one would expect as the overhang continues to diminish.

Greentree the largest servicer expects a 25 percent decline in new repos from their 2004 experience. And putting the foregoing together, it appears that new repos are declining. Inventories of repos are declining as they are absorbed. Prices of repos are firming somewhat, and delinquencies are signaling flat to improved conditions and thus competition from repos to the sale of new homes may finally be receding.

Historically low interest rates----or at historically low interest rates, and their competitive effect from conventional mortgages will continue to play a role at the speed in which our industry recovers. Through February 19th, 2005, the Company has added 61 net lease sites to the portfolio. This represents 5 consecutive weeks of positive performance after losses of 42 sites in the first two weeks of the year. Our net daily rate of leasing, if maintained, would result in 445 net lease sites for the year which is the target for our 2005 budget.

We are intensively managing this effort, reviewing and revising marketing and advertising programs, expanding telemarketing programs, improving capabilities of our website to attract residents, focusing on apartment dwellers to explain the relative benefits of manufactured homes, and developing special programs to attract dealer driven business.

The successful implementation in 2004 of our new software, in our operations Department, allows the Department to access real time information at each manufactured housing community. This new reporting enhances the monitoring and adjustments to the programs just discussed on a community by community basis.

We have not closed on the $100 million of property as had been expected. While the seller does not intend to be an owner for the long-term, certain major issues have continued to cloud their short-term decision-making process. We do expect to close on two communities for approximately $12 million of cash consideration, first quarter. Accordingly we have called the $50 million 8 and 7/8 perpetual preferred issue which will be retired in mid-March.

The Company stands by its previously issued earnings guidance and at this time Jeff and I would be glad to address any questions.

Are you ready for me to open the floor for questions, sir?

Please.

Thank you. [Operator Instructions] Our first question is coming from Jordan Sadler of Smith Barney. Please proceed with your question.

Good morning. I notice, that despite the occupancy decline year over year of a couple hundred basis points in the same store portfolio, the income from property, and the revenues, were up 5.7 percent; up pretty strong. Can you just give us break out in terms-- well, number one, what's in income from property? Is that revenues from rents as well as -- does it include utilities? And then second, can you give us the break out of what the average rent increase was?

The average rent increase for the year was about I think it was about, between like 4.4, 4.5 percent in that range. What's included in income from property is all income which is generated at the property level, which would include cable revenues, include utility revenues whether it is water or electric, would include tax recoveries where there are pass-throughs in Florida, late fees and essentially anything where the resident is writing us a check or the community is generating some sort of revenue. The strength in Q4 was largely the RV portfolio which is continuing to operate at very strong levels, of course the NOI growth for the year was that, you know, expenses were maintained under pretty taught control.

Okay. But, generally, just the revenues of the properties would probably be something lower I guess because of the occupancies; if you are talking about just rental revenues?

Well, sure, the occupancy would depress the revenue number. It is in effect netted in the increase.

Sure, sure. Okay. On repos, I had a question. You talked I about, and gave some good color, as to what the expectations were and what happened year over year. What did you see happening in the fourth quarter specifically?

Fourth quarter specifically, I don't know if you have the numbers there, Jeff.

Well, the first half was just about flat, and the second half was obviously, we had a surge of repos as we have disclosed. Why that happens and what generates that timing? We don't know. We do know, in discussions with Origin, that they had seen a surge in the second half, in repos after you know an improving first half. So, the answer is, I don't know.

4 Q is like 3 Q then?

Yes. They were very close.

Flattish.

And to date, first quarter seems similar to what was taking place last year. So, it's hard to draw conclusions.

Have you guys done any work to try and figure out how many of your residents remain, let's say under water and are eligible for possible repossession?

I don't think we're necessarily privy to the information as to where their principal balance is and financing and related job security and all those issues that would really allow us to make a real determination. What we have seen, first quarter, is that, again, in a brief period of time, there's a probably 25 percent improvement, to where repos had been running at third and fourth quarter. But, again, we saw that take place, first quarter and second quarter last year, not to be repeated the latter two quarters. So, we have got to be cautiously optimistic. But I think the underlying factors are that there's 22.5 percent fewer repos in the finance company's inventories '04 over '03 and the expectation of Greentree that it will be 25 percent lower at the end of '05 than '04. So, certainly, we believe they're heading in the right direction.

Okay. Moving on to acquisition opportunities; is the 100 million sort of just put on indefinite delay at this point? Or do you continue to expect that you'll be able to close on 100 million in '05?

Well, I think that, to answer that question, the facts are that we had a fully negotiated purchase agreement that, at the very last moment, the sellers had some issues, unrelated to the terms of the agreement. It is taking them a long time to go through that process. And rather than have the certainly negative dilution of the cash on balance sheet, we thought step one was certainly to pay down the perpetual preferred. And, not make the assumption precisely of when or if this $100 million acquisition will move forward, but, rather to focus on a pipeline of acquisitions, again, that are more realistic, in the short-term, 12 million of which will be closing this particular quarter. An additional 40 million of which we are in a due diligence process right now.

So, to answer your question, I would say that, we are looking to deploy that $100 million in various other acquisitions that the acquisition department is focused on right now. It probably will happen, over a pro rata basis in '05, independent of what takes place with this original acquisition.

Okay. I noticed in your, in your comments in the release, you discussed sort of affirming the previously issued guidance. Which also had a range of 260 to 270 for 2004. Obviously, you guys are at 257. Should we assume the same 8 to 10 percent FFO growth in '05 and going forward off of the 257 now or is there something going away, a one time item per say in the fourth quarter that maybe pushed numbers down and you think the FFO growth would be off of the old range?

I think because of the timing of the refinancing, the guidance that we put out was an '09 guidance that looked for 8 to 10 percent FFO growth as we took advantage of putting the money to work and improving the occupancies within the portfoIio. So, I think what we're reconfirming is that we're comfortable and can stand by that guidance. It was not a specific '05 guidance.

Okay. But I guess the 8 to 10 percent growth comes off of the '04 number? The actual '04 number at this point? As a base?

Yes, I would say---

You had a base of 260 to 270.

Yes, I would say that's correct. I think as I pointed out, primarily----primarily the difference between what we're reporting is the one time write off that Origin is taking on its Legacy loans.

And you assume that goes away in '05? Basically flatline it? Zero contribution margin?

We do believe from their explanation in the press release that it is due primarily to Legacy loans that had been previously sold with recourse. And they have no control over the servicing of those loans. My understanding is those are pre-2002 type loans that have 30 year amortizations and they're plagued by all of the other characteristics of the bad loans that were made historically. It's been a very shrinking pool of loans, and the Board of Directors over there just concurred that to take the write-off would give greater clarity to the core company's profitability and growth which is taking place there. So, Sun being an equity investor, did not play a role in making that decision of staying, and the press release came out yesterday, when we became aware of what their intention was.

Okay. Last question, was, it looks like you sold some assets during the quarter, land and maybe some properties. Can you give us some color what was, what the total value was, maybe CAP rate if there was a property in there – (multiple speakers)?

Firestone, Colorado we sold one expansion parcel of land. Jeff, do you have the numbers?

Well, the gain is -- was net -- the gain on sale of land net 3.880. $3,.880 million. There were---there were no---- It wasn't a manufactured home community. It was just raw land.

Is it undepreciated?

That's right.

You excluded that from FFO.

Yes.

For any particular reason?

Just to exclude gains and losses on sales of assets. You know, it's -- I wish FFO were a clearer definition.

Yes.

But, you know, so, I guess to be conservative.

I think that, the policy of the Company now is to look at some of its raw land holdings, and where we don't see the continued development certainly, in the near future, where we can sell off some of those assets and, in fact, this was a case where we did make a nice gain. Those are the types of things that we're looking at now.

Thank you.

Our next question is coming from Art Havener of A.G. Edwards. Please proceed with your question.

Hi, it's actually Dan Ferris (ph) filling in for Art. First question, you guys had mentioned that you saw some strong results from your RV communities. Could you kind of elaborate a little bit, breaking down the difference between the RV communities versus the manufactured home communities?

Well, I mean, the manufactured home communities generally appeal to permanent residents. The strength in the RV revenue is really generated by seasonal visitations by the RV community. The RV people; which, the RV new sale market has been very strong the last few years. That combined with international issues and tensions seem to have caused people to desire to vacation more in the U.S. and on their own terms than traveling abroad. So, the last couple of years, continuing into 2005 have just demonstrated real strength in that seasonal RV marketplace which is actually a higher socio--- I won't socio, but a higher economic profile than our average M. H. residents.

Are you expecting that to continue in the future more of a seasonal, like Q4, Q1 results?

I think a lot of it depends on whether we discussed before, the -- that a seasons early reservations are as good as the current year's weather. So if there's good weather one year people are eager and rapidly book up next year's reservations, which is a good sign for the future. So, we expect normal growth, based on the weather that was in our communities this particular year. There might be some positive factor that we're trying to look into now, with regard to the hurricanes that took place in Florida. Causing some short-term occupancy, by those involved in the hurricanes, certainly by those who are involved in the work after the hurricane; perhaps occupying some more sites that would have been otherwise vacant, and that information we're looking at right now. I don't think it's significant. But, I do think it has some positive effect on there. But, I think as Jeff indicated with the affluence over the last ten years in growth in the economy, the RV sector and the RV industry has been selling a lot of homes and there are a lot of users out there, right now, who need these type of site that we provide. So it's been a good year for us there.

Okay. Moving on, the recently developed sites as well as you had mentioned, looking to possibly sell some of your land, I mean are you seeing -- what type of traction are you seeing as far as leasing up some recently developed sites?

Well, I mean, the statistics show that we're net, we're losing sites. You know, about 50-60 percent of the loss sites are due to repossessions and that impacts new communities that were leasing up during the period of the easy credit, say through 2000 or 2001. So, you know, in 2003, and '04 it was as I just described. In 2005, as the press release and Gary's comments indicated we're net up 61 through the first 50 days of the year. So we're on a track to hit our 445 for the year.

Okay. Last question is, can you guys offer any type of guidance range for the first quarter '05 or basically just looking at the 8-10 percent growth off the '04 numbers?

I think we're just going to stand by what we have got out there at this point in time. And not get into a quarterly process.

Okay. That's all I had. Thanks.

Our next question is coming from Alexander Goldfarb from Lehman Brothers. Please proceed with your question.

Yes, hi. Good morning I just want to go back to the guidance assumptions; I know in the press release that came out back in the fall, the share buy backs were not included in the guidance. I'm presuming that's still the case. The preferred I think was not mentioned in that press release. But clearly now you're taking it out. From your comments it sounds like the---you know taking out the preferred and doing the acquisitions a little bit later sounds to be offsetting each other. Should we think of it as a wash or how should we think of the preferred in terms of the guidance?

Well, it's not really my recollection that we excluded retirement of the preferred in the -- or the stock repurchase in the guidance we issued. Although, I have to admit, I haven't read it in awhile.

I can -- I mean I can read it.

As previously announced the Company expects to use the remaining proceeds to finance some kind of combination of additional property purchases, additional stock repurchases and the retirement of perpetual preferred operating partnership units. The Company has not determined the timing and specific allocation of the (indiscernible) -- so, those items I think, by inference, were considered in our -- our guidance through 2009.

I'm just reading on the November 30th press release in Other Factors. That's fine. fine. I just wanted to get clarification on that point. Then can we look at the dividend which is expected in that same press release to grow 3 percent annually. Is that still your expectation?

I think that, that is the expectation in guidance and our expectation at the Company. But, the dividend is a function of the board meeting and setting that policy, which, they are looking at on a quarter to quarter basis.

Okay. So that would be something that we would look to later this year?

Correct.

Okay. The S.G.&A. it was a bit higher than would have expected; were those Sarbanes-Oxley expenses coming early or was that bonus related?

It wasn't bonus related. It was our software system cost was implemented in 2004. So a lot of training costs of bringing in community people, preparing the training materials and so forth. So, Yeardy (ph), which is the name of the system was worth $700,000 of increased G&A; Sarbanes Oxley came out at about 500,000. Which is what we have kind of been estimating I think previously. And then another major item is Michigan single business tax which is a unique animal which is not based on net income but is based on a myriad of factors and which, incidentally, the State's Governors actually thinking or suggested a reform that might have the effect of reducing it and reallocating the tax burden in the state. But, anyway, that number was up about $375,000, so those three pieces count for almost 1.6 million of the increase. And then if you took just the economics of 4 or 5 percent that would close the gap in terms of the increase between '03 and '04.

Okay, so looking to '05 then on the SG&A, should we be looking at additional Sarbanes Oxley costs or the 500,000 is now in the numbers so we could use the quarter's sort of a run rate?

We expect that Sarbanes Oxley at that level to be a maximum.

So something that's 5.5 million range.

The Sarbanes Oxley at 500,000 should be a maximum, on an annual basis.

On an annual, not per quarter?

Oh, no, not per quarter.

Okay. And then looking at Origin, I know what they put out last night. But, it sounds like they have done a little retrenching of their business. How are you---how should we look at modeling the contribution from Origin this year?

I think you have to turn to them for guidance. Because it is a very challenging position, I know for Jeff and the Company here, to be able to model out, going forward and, as I'm sure our shareholders and the Analyst Community looks forward to guidance from this company and others. We are waiting to see what type of guidance they are going to put out. And I think what -- what we have to work with is the four quarters of their actual growth, in '04. And, I think their press release and conference call is about three weeks away from now. So, this prerelease, while it told us about the one time write off, didn't give us an idea of where they're heading for '05, so we're as anxious as you to know how to model that in there.

Okay, my final question just relates to the core business which the NOI has been---the growth has been very good and it shows improvement, yet quarter after quarter the growth and the NOI improvements of the core don't seem to translate to the bottom line. What comfort can shareholders and analysts have that going forward we can look to the FFO growth given that it doesn't really seem to be an issue of the core but it seems to be an issue of everything sort of below the core.

Well, I have the comparison of Q3 with Q4. It is exactly as you kind of globalized. NOI was up 2.2 million. Home sales net was down 400,000. Ancillary revenue was down 200, interest and other income was down 100. Origin's contribution was down 1.950 million, interest expense was up 960, and G&A was up 960. And then when you consider the hurricane that was in Q3 and not Q4, the 600 grand, you end up with an---- $0.08, explaining $0.08 of the difference between '03 and '04.

So, we have said, in the guidance, that we believe the G&A costs will be stabilized. We did draw down the last piece of the Fannie Mae in Q4 which should stabilize interest expense. Origin, we're optimistic, that this, as Gary has described, is a one time thing. And that they will achieve regular earnings contributions. The interest in other income item was nominal as was actually the ancillary income change.

Home sales, maybe -- maybe it was seasonal in Q4, but, obviously, it's our business and our focus, to sell homes. So, that would be kind of my -- and we won't have any -- we're highly confident we won't have any hurricanes for the first quarter of 2005, so, my answer is, we're as aware of this as you are and we're focusing on each of the items and we think they should be in a mode of improving.

Thank you.

Our next question is coming from David Rodgers of Key McDonald. Please proceed with your question.

Good morning guys. Could you talk a little bit about the rental home portfolio? Where the size of that is now and the number of homes sitting out there maybe occupied and empty?

I think that it has been one bright spot for us, it stands at around 2,000 which is I think what we discussed in the previous quarter. It is basically very highly occupied; the turnover is roughly 50 percent a year. So, what we're very, very focused on is obviously, slowing down that turnover, converting those renters to purchasers of the homes. In '03, we converted 283 of those homes, that's what we refer to as the preowned rentals, into sales. In '04 we've had another positive trend of 357.

And in '05, and beyond, we do have a five-year plan in place that says the following, and I think we have discussed this before: that we will only buy a repossessed home in our own community. But, we are committed to doing so because it offers great value at the purchase price, for us. And then translates down to good value for the customer. We're able to keep that home and maintain the cost of the set up and that value in there, and offer a rental opportunity when we cannot turn around and sell that site.

So, as we go from just under 300 to 350, '04 and look for something, you know, additional, in '05, we have a five-year plan where we would like to get out of the business. And I think we're pretty much on track for that plan, as we develop all the programs that I discussed, earlier, which involve telemarketing, which involve building up the credit of the resident. And, you know focusing all of operations to translate the rental program into a sale program.

You didn't give a number on the occupancy, would it be higher or lower or kind of equal to where your current portfolio occupancy is?

Well, we have---the number is actually 1957 rented or homes which are currently rented. In addition, in the portfolio, we have of 135 communities or whatever, we have another 577 at 12/31/04, 577 homes which are available for either rental or purchase. And then we have our new home inventory on top of that which is essentially for sale.

Again, so I guess your margins look pretty good, would you anticipate the for sale volume to continue to increase here in 2005? It took a dip in the fourth quarter -- will it push back up here, early in the year?

Well, the year, on new and used preowned home sales in January is generally not an auspicious month. So it's a little hard to be predictive. There's really not a base at this point in time to be predictive with any accuracy in terms of how the home sales business will turn out for 2005.

I think it's a good question, and I think that the irony, and I guess it can only be answered after the end of in this quarter. But, this isn't a quarter where we would expect to see a big surge in home sales. Quarter two, quarter three, should be and certainly, quarter four shouldn't have been as weak as it was this past year.

Could you give us any sense of the acquisitions behind this? I know you're still sitting and waiting on this 100 million or at least keeping an eye on it. Could you give us an idea of beyond this 12 million you talked about, what the pipeline of deals you're looking at is, to give us confidence about the reinvestment of the proceeds.

I think there is $40 million worth of properties I indicated under due diligence at this time. And, that would be pretty normal, except for the fact that, we had been very attentive to the magnitude of the $100 million acquisition. And had been working and continue to work very closely with that group. But, finally, determined that the issues that they have are going to take them a period of time to have a process to work through. So, I would say, that, our goal is, additional $40 million of acquisitions right now. For '05, and, high mark you know would be that $100 million.

And final question for me, you talked about the firm policy about land sales and looking to sell off some parcels. Could you quantify maybe a certain portion of that, which, the board or management has decided, maybe is no longer a viable development option?

I think that it would be a little too premature to quantify that. I will share with you that management is taking a very hard look at its land holdings. We are in dialogue with one or two residential builders who are looking at the possibility of acquiring selective parcels. In fact, we have one joint venture offer on one particular parcel at this time that management is reviewing. But a lot of this, again, is a function of the historically low interest rates. The negative amortization mortgage product that's out there right now, that is still, again, while we can't quantify it, is competitive in certain markets with our manufactured housing.

So, to the extent that it continues, I think there is more opportunity to sell off the land holdings. To the extent that rates do increase and repos go down to the more normalized levels and we become a more competitive force again, I think that there is going to be less ability to sell some of this land.

So, I think the expectation right now is that we have sold our first piece. We did certainly get a higher price for it than we probably had anticipated and that has caused us to review the balance of our land holdings and determine what opportunities are there, and we are doing so now.

All right. Thanks guys.

Our next question is coming from David Shulman of Lehman Brothers. Please proceed with your question.

Good morning. How often do you evaluate your investment in Origin?

I think the board reviews what has taken place as a matter of their business each quarter. And I think, as representative of Sun's investment over at Origin I report to them what is taking place over there. So, on a quarterly basis the board is reviewing its investment in Origin.

What would it take for the board to decide it's time to move on and not have that investment any more?

I think a lack of confidence that they should be in that investment.

Were there any specific operational issues? That you could be more specific?

There are no specific operational issues that I'm aware of, to be more specific on. I think that, they've discussed as a company and I've reported to the board, and the shareholders, that, they are operating quarter after quarter in a growth mode, they're profitable. They're probably yielding about 50 percent of the return they anticipated yielding and the difference being while they're making their budget on their organically grown business and originations and curitizations, they have not been successful at acquiring orphan portfolios, orphan servicing pools and the like that they anticipated being able to acquire at discounted basis. And being able to return those profits to the shareholders have not taken place.

However, there has been a strong vote of confidence by the board and their share holders, that all interested parties would rather see them maintain their discipline and grow the company organically than make a mistake by over paying for a portfolio or servicing portfolio.

Okay, thank you.

Our next question is coming from Paul Adornato of Maxcor Financial. Please proceed with your question.

Thanks. Good morning. Just to clarify, have you bought back any shares under the new million share authorization?

No.

And I'm trying to understand the uptick in defaults. Were these newer originations? You know presumably with better credit underwriting or were these older, perhaps pre-2002 like Origin referred to?

I think it is clear that we are seeing the baggage of the past and this baggage has been coming out since 2000. So, certainly a little over four years now, five years. And, it is the same type of loan, very low down payment unqualified buyer, very inflated purchase price, 30 year amortization so no principal has been paid down. In often cases they are in fact, probably decent credit people who can't get out of the home any other way but than turning the keys back in because of the depressed resale marketplace they're facing against their other repos. So it is kind of a catch-22 situation that we have discussed for a long, long period of time. And, the big question mark is when do things burn off and turn around? I think it's slowly happening. I think that, to make sure I answered your question, these are not the new loans or new homes which have 15 or 20 year amortizations. Real 10 percent down payments on them. And 700 average FICO scores on them. I think that, this clearly is the old stuff still coming back.

Okay. Thanks that's helpful.

Our next question is coming from Richard Paoli of A B P investments. Please proceed with your question.

Couple of questions. One is a bit of a follow-up from I guess a question that was asked earlier, but, I'd like a little more specifics. First, could you breakdown the same store NOI growth by property segment, specifically RV, all age and the family communities?

The problem with that is that, in our RV communities, they are mixed communities. So, for instance, Indian Creek has 353 manufactured homes in it. It also has a permanent RV component and a seasonal RV component. That happens to be our largest RV community. That kind of mix also exists in other communities.

But you don't have the capability, to, does the amount of RV sites shift around or something that you can't -- you can't break that out by segment?

We don't go through the process of making arbitrary allocations to do it. We just look at the community as a whole. But, I mean, so we haven't done it. Could we do it? Sure we could do it. But, that information is not something that we look at.

Okay. Then, breaking away from the RV component then, do you have you know, communities that are specifically without RV components in it, all age and then the family, excuse me, the over 55 type communities?

Yes, we do.

Do you have a little color on what's going on between those? I think I know what the answer is, but I just want to get some facts.

Well, what I am saying is we do have the data, but we haven't -- we don't actually look at it, in that way. I mean, we really look at manage our communities through the year, actual to budget and, through that kind of an operational process. But, in answer to your question, do we have the data and could we look at our all age communities and our 100 percent retirement communities to see what the reality is, we can do that. And I will do that.

In the future if you could provide that color it would be just kind of helpful. Again, it is like the color you gave on where the proportion of, you know, the repos are happening. Just to help me get my hands around the portfolio in a couple of different angles.

Other question that I have is and this is sort of a bigger picture one, I'm struck by one, you're calling for I think it was 445 net sites leased, but then you're very hesitant on your assessment of the, you know of the repo market, and, you know on one hand you give positive type comments regarding that you know Greentree is seeing delinquencies drop. But, it seems like you were broadsided in the second half of this year. That delinquencies and what have you, were not really good indicators of what happened in the second half. I mean is that a fair assessment that you just don't know what's happening in terms of the repo market?

I would say we are seeing a lot of positive trends but they haven't yielded positive results yet.

We've been sort of hearing that, you know, this "things are getting better" story for three years. When does it get better? When do you guys really – (multiple speakers) -- on the table.

You're not hearing----- if you go back five years ago. We all looked for a 18 or 24 month horizon that really never caused the turn, that never came. So what you are hearing, what you just restated is basically we have the same kind of cautious expectation, and don't want to give any more expectation out in the marketplace. Because, this broadsidedness that you referred to, after 2 solid quarters of momentum last year was wiped out by 2 very poor quarters in occupancy last year.

So, we are hesitant to state other than the facts as we know them and the facts as we know them is that repossessions have been shrinking, that the information that we have conveyed to you today and in other calls is the information that we are gathering and being reported to us, however, it has not effectively caused us to want to come out and say that things have turned around and we are you know positively on the upswing and we expect all these positive things. I think we try to be cautiously optimistic. I think that management here is extremely sensitive to the performance of the Company as are the shareholders and to the ability for us to be able to suggest what the share holders should or shouldn't expect, until we're certain that the Company's management can deliver those expectations.

Right.

So, what we're coming out with now guidance wise, and the other things we're discussing is as confident as we can be in today's marketplace.

Right. Okay. One last question, and it relates to your —the valuation of Origin with respect to what you have invested in it relative to its current market price. If you could just kind of back up a little bit. How much have you invested in there? I guess you've received some actual cash dividends. More or less what's your net investment relative to what the implied valuation of the Company is on the market price today?

Well, we have at 12/31 we've got the investment in Origin account is 48.4 million. And, I think stock is around 750, thereabouts, and we have 5 million shares. So, I guess, the market value at the price would be around $37.5 million at this point in time.

At what level, I mean is there any point that you have to take an impairment on your investment or no it's an active----

You're right. It's not a marketable equity security; it's an equity investment. So, you're not required to mark equity investments to market on a quarterly basis.

Is there a point though, where the board would determine that, you know, it's the appropriate thing to do or is it just not looked at in that regard?

Well, it would be -- I mean, if it's going to be a function of Origin's ability to execute the business plan over you know, as an equity investment you look over a little longer horizon. So, the issue will be, can they, will they continue to improve their core business? Will they generate meaningful profitability?

Okay. That's all I have. Thank you.

Our next question is coming from [Scott Sheppard] of Brick. Please proceed with your question.

Hey guys a lot of my questions were just asked. It was a follow-up question to David Shulman's question vis-a-vis Origin and value. I guess, the follow-up I would have to the answer you just gave is, would you consider a reduction in book value, a meaningful trigger for an impairment charge against the Origin investment? In other words, if Origin takes a large charge as they just have announced this morning for a write off on a loan portfolio, would that be a reasonable trigger for you guys to mark down your investment in Origin?

Well, you know, it kind of depends on what their prospects are. A lot of times, companies when they finally or ultimately face up to certain business issues, in this case, their Legacy loans, and get that behind them, have improved operating results. So, you know we're not -- we're certainly not here to say that is the case here. That's up to Origin to disclose that kind of information and perhaps, some of that will be forthcoming in their -- in their earnings release.

I think that it is an investment in a business that has taken a write down and the expectation by the investor before you would look at any kind of impairment or anything like that would have to be deemed to have been a sufficient enough amount to take some sort of write down or for the board and other shareholders to consider the fact that, the investment has been impaired. And I think that the investment in the company right now, that, we believe, will be profitable and growing, will at this time, yield the kind of results that wouldn't cause something like that. But, obviously, one would consider that if there was a reason to consider that.

Okay. I guess what they're going to come out with next---in 3 weeks is that book value is probably about 850 a share. And based upon what you just said, you guys are carrying this on your balance sheet at about 950 a share does that sound right to you.

That's close.

One more question, given the cross holding here of your shareholder base or your insiders and the company, were you guys to decide to sell Origin shares, do you have a policy vis-a-vis who would sell first? Either the company or people that are insiders in your company and insiders in that company?

I think the board would look at it independently, and the independent non-related board members would make any decision related to that investment as they have done in the past, so for those insiders who are involved, there's no decision-making process that they're involved in.

In other words there is no policy that would say that these guys would not sell ahead of the company were they to lose confidence in Origin. I mean, I'm wondering what protection there is to your investors that big shareholders in Origin that are also Board members of Sun don't sell ahead of the Company.

Well, the only big investor would be myself. And, I'd have to probably do a little bit more research to see if that language does in fact take place. I'm not aware that it does or doesn't. I think the only protection that was put in place was the independence of the Board to make its own decision with regard to Sun's investment there.

[Operator Instructions] Our next question is a follow-up coming from Jordan Sadler of Smith Barney. Please proceed with your question.

Hi guys. Two quick ones. What was the total amount spent on hurricane damage to date? I know 600,000 was the estimate that you gave, but I was just curious what you spent.

I think at the end of the year, the number was about 1.6 million in total expenses all of which we expect, or put it differently, in fact that means we have 1 million net of the $600,000 reserve. We see no issue with that as a minimum recoverable from the insurance companies.

Okay that's accrued, not, not yet expensed?

No. Not expensed----

The million?

Because we've had negotiations; we've entered negotiations with the insurance company and their first offer, plus that, the amount of their first offer, plus the $600,000 reserve exceeds the costs that we have on the books at 12/31. Now there are additional costs to be incurred in '05, but, it's also----was their initial offer which was somewhat lower than our initial proposal. So, it's one of those processes.

Okay, separate issue. How many homes did you guys purchase during the quarter, either for your for-sale inventory or for the rental inventory?

I think we'd have to get back to you on that number.

Okay. But you were an active purchaser of new and used homes?

Yes.

Okay, but you don't know the amount spent just yet; you'll get back to me on that?

Yes, we'll have to go to home services for that.

Okay, I noticed that interest income was down significantly, sequentially, by about $1 million. Was that related to specifically?

I thought when I compared interest income Q3 with Q4, and I don't have Q3 right in front of me; I thought it was down 100,000 from Q3.

Interest and Other Income?

Yes.

Could be. Last quarter it was 2.7 million. And this quarter it was 1.8.

2.7? Well, I'll have to get back to you on interest income because I---I don't have a quick answer on that one.

Okay. My last question; maybe you guys could give some color on what you're seeing in terms of competition from Land Homes, specifically in markets like Michigan, Indiana, and Texas.

The only place we've had that kind of competition has been Indiana, and it hasn't been a factor in Texas and Michigan. And Indiana has traditionally had Land Home packages that probably hasn't changed a whole lot. It's gotten a little bit more competitive because the combined traditional mortgage that you can put on a home in the land at these interest rates are very competitive with the [inaudible] ranch and the home payments. But that's the only area where I would say that we experience significant competition from it.

Okay, thank you.

Gentlemen, we show no further questions as this time. I'd like to turn the floor back over to management for any closing comments.

At this time we'd like to thank everybody for their participation and, as always, Jeff and I are available at the Company.

Ladies and gentlemen, this concludes today's conference. Thank you for your participation.